Buy now, pay late options are exploding during the pandemic, but does it make financial sense?
SALT LAKE CITY, Utah – “Buy now, pay later” options have exploded during the pandemic, making it much easier to shop online in multiple installments. The finance option has become so popular that analysts estimate staggered spending will reach $ 760 billion per year by 2025. But dbe it does it make financial sense?
“Buy now, pay later“ Options allow customers to divide purchases into installment payments.
“They have really reached critical mass,“ said Matt Schulz, LendingTree‘chief industry analyst.
LendingTree recently posted a study who found that 31% of buyers used “buy now, pay later.“
“People like to use these loans,“ said Schulz. “I also think people really like these types of loans as opposed to credit cards because they‘re finished, because you know exactly how long it‘will take to pay them.“
A lot “buy now, pay later“ services tout interest-free payments if you pay for your purchase on time, but this has stumbled a lot of buyers.
LendingTree‘The study found that more than 7 in 10 people ended up with deferred charges or interest, perhaps at a rate you might face if you missed a credit card payment.
Some “buy now, pay later” services charge late fees but no interest, while others charge interest but no late fees, and there are a few services that charge both.
Almost a third of users surveyed by LendingTree said they had no idea what rates or fees they might be subject to before signing up for the service.
“It can harm your credit if you are late with a payment or if you‘you do not follow the payment schedule,“ said Schulz.
There’s another problem: two in three shoppers told LendingTree that using “buy now, pay later“ made them spend too much, buy things they wouldn’t normally be able to afford.
“This‘is never a good slimg, especially in a difficult economy,“ said Schulz.
Yet consumers have clearly appreciated the possibility of “buy now, pay later.“
“We saw about two-thirds of people who had used these services say they had used them five or more times,“ Schulz explained. “This‘A very large number of people use these services.“
One thing to consider: if you pay for your purchase on time, the 0% interest may make it a better option than a store credit card. Just make sure you read the fine print. Make sure you know the payment schedule as well as any interest or fee penalties.
“If you make a mistake it can hurt you,“ Schulz warned.